While M&A deals can add value to the company’s assets, they can also expose it risk. Companies that fail to safeguard data during M&A deals may be subject to costly penalties and lose trust in digital technology. The good news is that a well-planned and implemented privacy due diligence process can help mitigate the risks.

Therefore, many M&As involve a lot of sensitive data that can be affected by regulatory concerns and legal issues. This is especially true for M&As involving highly-regulated industries such as finance or healthcare. In these situations parties could need to conduct an additional review of compliance with regulatory requirements as part of the due diligence process.

Before closing, the buyer should be aware of the degree and nature of risk that comes with the transaction. This includes any sectoral regulations such as the Gramm-Leach-Bliley Act, the Health Insurance Portability and Accountability Act or even consumer privacy laws like the California Consumer Privacy Act. It is crucial to talk with the employees of the target who are accountable for data security and privacy to get an accurate picture of their status, including the details of any policies or procedures that could be problematic in an M&A scenario.

Therefore, it’s essential to include forward-looking covenants in the sale contract, which will require sellers to enhance their data security practices prior to closing. This will not only help ensure compliance with applicable laws as well as an excellent method to decrease liabilities after closing and reduce the impact of M&A activities on the likelihood of data breaches.